Business Case Study: Organizational Behavior at Hyundai

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  • 0:00 Hyundai Motor Company
  • 1:21 The Krafcik Era
  • 2:14 From Krafcik to Now
  • 3:32 Culture to Product
  • 4:07 Lesson Summary
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Lesson Transcript
Instructor: Dr. Douglas Hawks

Douglas has two master's degrees (MPA & MBA) and a PhD in Higher Education Administration.

Just like people, companies have personalities. It's just with companies, it's called a culture, and it's developed through organizational behavior. In this lesson, we'll talk about one example of a changing culture - the Hyundai Motor Company.

Hyundai Motor Company

If you really want to understand the roots of Hyundai Motor Company, you have to go back to post-WWII, when a man named Edward Deming went to Japan to work with Toyota Motor Company on research about quality engineering. As you may recall, starting in about the 1970s and heightening in about the late 1990s, Toyota became the pillar of quality and excellence for automobiles in the world, while American car companies were beginning to struggle.

Early on, this wasn't going unnoticed by manufacturers in South Korea, so they started Hyundai Motor Company. It was actually about 33% owned by Kia Motors. But together, these firms thought that they could produce the quality that Toyota was becoming famous for. They just needed to break into the market. They did that by offering a 100,000 mile, 10 year warranty, figuring American customers would think 'no car company would offer that if they would actually have to fix their cars that much, so they must be good.' Unfortunately, it was just the opposite. Many customers thought 'if it needs that kind of warranty, it must be bad.' So, Hyundai struggled to get going; that is, until John Krafcik joined Hyundai in 2004.

The Krafcik Era

In 2004, Hyundai were cars college kids could buy cheap, and hope they lasted four years. Comedian Jay Leno joked that you could double the value of a Hyundai by filling it up with gas. It was certainly not a major player in the automobile industry. But John Krafcik came in with a new approach, what he called 'set some aspirational targets and continually communicate them.'

Krafcik didn't want a company or employees that thought they could copy a competitor and enjoy some of their success. He was after bold moves. And, in 2008 when he was named CEO, bold moves are what he made. Focusing on quality, he transformed Hyundai from a second-rate car to a buyer's first choice, by hiring designers that would develop classy and creative cars, and making sure engineers understood the importance of doing things right the first time.

From Krafcik to Now

Since Krafcik took over with his assertive vision in 2008, Hyundai sales are up nearly 60%. During the financial crisis, when the automobile industry saw a 20% drop in sales, Hyundai was the only car company that saw sales increase (by 8%). In measures of quality done by a number of consumer magazines, Hyundai often scores 4th, just behind Lexus, Porsche, and Cadillac (not bad company).

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